March 14, 2017

On March 14, the Turkish government has announced diplomatic sanctions against the Netherlands. The sanctions, which suspend “high-level relations and all planned meetings “with the Netherlands, are the result of an intensifying diplomatic dispute between the two countries. The sanctions also include: a cancellation of permission for diplomatic flights by Dutch officials as well as a ban on the Dutch ambassador entering Ankara, until the Dutch government adheres to Turkish demands.

The announcement follows the cancellation of by the Dutch government of Turkish foreign minister, MevlütÇavuşoğlu’s flight permit to the Netherlands on Saturday, as well as the blocking of a convoy carrying Turkey’s family minister, FatmaBetulSayan Kaya, from entering the Turkish consulate in Rotterdam. The purpose of this ban was to block Turkish politicians from holding rallies.

According to the Dutch government, the Turkish ministers intended to campaign to the large Turkish community living in the Netherlands on behalf of a Turkish referendum to be held in April that would augment the power of Turkish President, Tayyip Erdoğan.

Build up to Sanctions

Prime Minister of Turkey, BinaliYildirim, announced the “harshest possible measures” against the Netherlands last weekend. According to Mr. Yildirim, by blocking her convoy, the Netherlands violated the diplomatic immunity of minister Kaya, who was then deported to Germany. “Everyone should know that Turkey will retaliate in the heaviest possible way,”declared Yildirim. He noted that while supporters of terrorist organizations such as the Fetullah Terrorist Organization and the PKK roam freely in Europe, Turkish ministers were nevertheless denied entry.

“The shame and responsibility for this unacceptable and dangerous act, in our deep rooted diplomatic relations, belong to the Dutch Government,” said the Turkey Ministry of Foreign Affairs in a press release on its website.  “We declare solemnly to the public that we will react as we deem appropriate without harming our long-standing friendship with the Dutch people.”

In addition to the sanctions, Turkey has announced it will challenge the Netherlands in the European Court of Human Rights over its refusal to allow its officials to enter the country.

Reaction of the Dutch Government

The Dutch Prime Minister, Mark Rutte, who is currently in the final stretch of a heated election race with the anti-Islamic Dutch parliamentary group, Party for Freedom, led by Geert Wilder, has said the visits were “undesirable” in the four-day run up to the Dutch election and that the Netherlands would not cooperate in their campaigning.

On Facebook, Mr. Rutte claimed that Turkey had sabotaged discussions between the two countries over the impending visit by Mr. Çavuşoğlu to Rotterdam. “Discussions regarding a small and closed meeting in a Turkish consulate or embassy were made impossible because of public threat with sanctions. Therefore, the Netherlands withdrew the landing rights of the Turkish minister. The search for a reasonable solution turned out to be impossible.”

Turkey’s Sanctions Regime

Turkey has its own autonomous sanctions regime including trade embargos on such issues as narcotics, casino machinery, certain types of plants, chemical weapons, and chemicals and waste that are categorized as dangerous.

In addition to this autonomous system, Turkey implements sanctions issued by the United Nations. Turkey is currently not a member of the European Union, but as it is currently seeking membership, its export controls regime is largely in line with the European Union system.

The Turkish Council of Ministers maintains a list of entities and individuals sanctioned by it and publishes this list in its official gazette, the T.C. ResmiGazete. This list consists of the names of individuals and entities that have been listed by the UN and the EU.

Turkey has several agencies that deal with sanctions and export controls issues, including the Ministry of National Defense; the Under secretariat for Foreign Trade, the Turkish Atomic Energy Authority, and the Mining and Exporters Union. These bodies also function as licensing authorities.

Unilateral Sanctions

The current sanctions imposed by Turkey against the Netherlands are so-called “unilateral” sanctions. Unlike multilateral sanctions, in which groups of nations act together against a specific target, unilateral sanctions are those imposed solely by one country against another.

Though current sanctions imposed by Turkey are political or diplomatic in nature, Turkey has the power to further impose sanctions by restricting or cutting off trade and business relations, such as import and export of goods and financial loans, or imposing other restrictive measures as it sees fit. Sanctions could also affect cultural activities, as well as the military and technological cooperation.

Compliance Effects for Dutch Financial Institutions and Corporations

By shutting Dutch companies out of Turkey, and vice versa, potential economic sanctions may place a burden on Dutch-Turkish business relations.Dutch direct investment in Turkey amounts to $22 billion, making the Netherlands the biggest source of foreign investment with a share of 16 percent.

Under the Turkish sanctions regime, sanctions must be complied with by any individual or entity within Turkey and any individual elsewhere who is a Turkish citizen or any entity incorporated or constituted in Turkey (including overseas branches of Turkish companies).

“At this point only diplomatic sanctions have been imposed. It remains to be seen whether Turkey will go so far as to also impose economic sanctions against the Netherlands, given the important business and military (NATO) relationship both countries have,” says Yvo Amar, sanctions lawyer at B&A Law. “That said, if Turkey imposed economic sanctions against the Netherlands, other than the current diplomatic sanctions, it would seem most likely that they would target business in general or certain branches in particular, rather than individuals.”

Mr. Amar goes on to address the practical repercussions, stating that, “Should they impose such general sanctions, Turkish banks would have to perform sanctions checks on transactions and their customer database relating to the Netherlands. For Dutch banks, such sanctions would in principle only apply to the extent that they actively operate in Turkey and would in such case entail similar obligations. In general, from a compliance perspective, compliance officers at Dutch banks will not have an active obligation to screen their client base and transactions, unless they operate from Turkey or are otherwise subject to Turkish law. However, since Turkish entities would not be allowed to do certain business with the Netherlands, from a business perspective, it would be advisable for Dutch compliance officers to take that into account when screening clients and transactions.”

Gert Demmink, Founding Partner at Dutch compliance firm Philip Sydney, thinks that in the event of further economic sanctions, “banks and businesses in the Netherlands can stay relatively at ease but will have to stay alert to the need to ‘filter out’ any Turkish ‘nexus’ from their transactions. ”Mr Demmink says, “this can take the form of extra customer and transaction due diligence.”

Mixed Reactions from Other European Countries

According to press reports, prime minister Rasmussen of Denmark has announced his government had also postponed the visit of Prime Minister Yildirim.

Similarly, Foreign Minister Çavuşoğlu decided against traveling to Switzerland for an event on Sunday after failing to find a suitable venue. Zurich’s security authorities had unsuccessfully lobbied the federal government in Bern to ban Çavuşoğlu’s appearance.

The French foreign ministry urged everyone to stay calm and said that there had been no reason to prohibit a meeting in France between Çavuşoğlu and a local Turkish association.

On March 13, President Erdoğan continued his verbal attacks by accusing German Chancellor Angela Merkel, who backed the Netherlands in its spat with Turkey, of “supporting terrorists”.

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